Washington’s efforts have so far had limited success, and some mining executives complain of a lack of coherent strategy at a time when metal prices are falling.
Insiders liken it to a “panic button.” And for more than 80 years, the primary job of the National Defense Stockpile has been to keep the US military supplied with essential raw materials and protect against supply shocks…So when China surprised the markets by restricting exports of two niche industrial metals last year, top-level officials in the Pentagon-controlled agency—and the White House—faced an uncomfortable reality: Its panic button no longer worked. The realization triggered a different kind of alarm in Washington…Former officials at the Pentagon’s Defense Logistics Agency, which manages the stockpile, say the US faces serious shortages of the raw materials needed to execute the energy transition at the scale envisioned by Biden and his team… The US in particular has been a hive of activity…Yet Beijing’s dominance remains unshaken. Tangible results from US efforts have so far been limited, and executives at some of the world's biggest mining companies have reported frustration at what they view as a lack of a coherent strategy on critical minerals supply. Other industry executives have urged Washington to take a cue from Beijing and develop a more nimble stockpiling program to both protect manufacturers from scarcity and insulate producers against price falls…The price drops have led some Western miners to cut back production, a trend that’s raised concerns about long-term resource security even as demand for electric vehicles cools…The US government appears to have listened. In December, Congress passed a new National Defense Authorization Act, which gives the logistics agency greater freedom to make long-term purchases without the congressional approval it had previously needed. It also guarantees $1 billion a year in future funding…A 60% slump in cobalt prices over the last two years has exposed the fragility in Washington’s efforts to bolster supplies of critical minerals. Beijing used the price drops to buy record volumes of the metal in two quick-fire deals executed in days last year. To have made a similar purchase, the DLA would have had to submit a buying request to Congress and wait, often for as long as a year, for approval. The NDAA reforms should streamline that process…The act also allows the DLA to strike long-term supply deals with domestic refineries, without which the US will struggle to process raw materials coming from countries such as Congo. Several companies are working to build refining plants for critical minerals in North America, but extreme market volatility has made fundraising difficult…But domestic producers are still reeling from the price falls. The only major cobalt mine in the US has been mothballed for almost a year. Owned by Australian miner Jervois Global Ltd., the Idaho-based facility could begin production within weeks, but it would need cobalt prices to almost double to $25 per pound, or receive additional government support, to justify finishing construction, says Bryce Crocker, the company’s chief executive officer…“If somebody wants to purchase the cobalt from us—if the government wants to support the price, or if a customer like an automaker wants to provide some kind of pricing floor—that could also work,” says Crocker, who adds that in Washington, stockpiling is “certainly being spoken about much more seriously than it has been in the past.”…Cobalt—as critical to jet engines as EV batteries—has been a source of anxiety for the US defense industry for decades. In the mid-1990s, the DLA had more than 20,000 tons of the metal in stock, enough to meet the entire domestic needs of the US for three years, according to Defense Department records. But when its budget was cut, cobalt was one of the first metals the DLA sold to balance its books—to the bemusement of traders who bought its reserves and sold them to a booming aerospace sector. And despite a weakening in demand for EVs, even the most pessimistic forecasters predict that cobalt demand will outstrip supply by the end of the decade…Freeport-McMoRan Inc. sold its majority stake in the Tenke Fungurume cobalt and copper mine—one of the world's richest—to a Chinese rival, CMOC Group, in 2016 after commodity prices began to fall in 2015. In 2020 it sold its last Congolese asset to CMOC, which has since developed it into the world's largest cobalt mine…“We offered it to the market for sale, and only Chinese companies showed up,” Adkerson adds…US officials have been deployed to convince people that times have changed…Some in the industry believe the stockpiling model should echo China’s National Food and Strategic Reserves Administration, more commonly known as the State Reserve Bureau…“The SRB has always had the patience to step into the market when prices are low,” says Tony Southgate, a cobalt trader... “and they very rarely get their timing wrong.”…Its buying strategy is an official state secret…“We need to use national defense stockpiling like we do the petroleum reserve,"